Interview with Brian Murphy of the Mortgage Advice Bureau about MMR
On 26 April, the new changes imposed by the Mortgage Market Review (MMR) came in to force. In recent weeks, there has been significant media coverage of MMR, with some publications suggesting everything from gym memberships to the cost of a haircut could be a stumbling block when applying for a mortgage. To get the lowdown, we speak to Brian Murphy, head of lending at the Mortgage Advice Bureau.
Will my gym membership really stop me getting a mortgage?
Some things have been a little hyped-up. The overall purpose of the MMR is to reach a more successful outcome for everyone, reducing arrears and repossessions. The changes centre on lenders needing to demonstrate that a client can fully afford a mortgage. The process will take a little longer, with lenders giving greater scrutiny to the individual circumstances of clients and requiring greater evidence of income and committed and discretionary expenditure. Rather than simply multiplying a customer's salary to estimate a mortgage, things will be taken to a more individual level to reach sustainable outcomes where customers get the right mortgages to suit their circumstances.
Will mortgage applications take longer?
Although lenders had been beginning to adhere to the guidelines well in advance of the commencement date, many are undergoing a period of change, and some are implementing new technology. This, coupled with an increase in customer enquiries, means it's natural that things might take a little longer than previously. There was a time when if there no issues you could receive a mortgage offer from a bank after ten days, but you may have to wait several weeks to see one now.
Will mortgages become more expensive?
With new procedures and a regulator that needs to be paid for, it's possible that these fees will eventually find their way on to the cost of mortgages. The market is very competitive, but there has been an easing-off in price competition over the last four to six weeks. With the changes coming in, nobody wanted applications flooding in at a breakneck speed, but this will change as lenders become more comfortable.
Have the pension changes announced in the budget had an effect on the number of buy-to-let mortgage applications?
At this stage there has been no specific increase that I can attribute directly to this, although it is reasonable to think that as time passes we will see more investment in property, with pensioners no longer limited by the need to purchase an annuity. If this happens, there could be an effect on first-time buyers, with some new-build properties instead being purchased as buy-to-let investments.
What advice would you offer to first-time buyers in search of a mortgage?
I would always advocate getting advice from an independent mortgage broker as well as your bank or building society. A broker will understand the circumstances and aspirations of a customer and will make them aware of the correct steps to take. Customers should sign up to a file checking service well in advance to check for any glitches in their credit reports - things like unpaid end fees from mobile phone contracts several years ago can affect your report without you knowing.
Customers should also get on the electoral roll as early as possible and ensure their finances are in order, checking for issues such as unauthorised overdrafts on current accounts. A proven ability to save is also a great bonus.
Those who are self-employed or contractors should have a solid track record of earnings and audited accounts. Proving income over a sustained period could also be a problem for those who have recently started new jobs and remain in their probationary periods.